Affordable housing is a Gulf priority

A mismatch between supply and demand has caused a crisis in the GCC housing market spurred by rapid population growth, rising house prices, and increasing urbanisation. Property for renting and buying in most of the main cities is out of financial reach for most of the young middle and lower-income classes. GCC governments have to action now to prevent the problems caused by inadequate housing worsening.

Housing is an economic asset, an investment and a market commodity. It is a means for poverty alleviation. Homeownership usually promotes wealth accumulation, allows the building of wealth through home equity growth, and boosts a better quality of life. Housing is also a major social issue as well as a basic condition for survival. A good housing policy helps to maintain political stability and a secure social order while preventing problems related to homelessness, poverty and exclusion.

The housing problem in GCC countries

In spite of the oil-based wealth of the region, the supply of housing affordable by those on a low or average income is constrained by lack of finance schemes and scarcity of available land, resulting in a huge unmet demand for housing among lower-income households of both nationals and expatriate workers. Wealth created by the oil boom has increased young people's aspirations for their living standards, but it has also created obstacles by encouraging high-cost construction. This has put property for buying or renting in most of the main cities of the region out of financial reach for the majority of the young middle- and lower-income classes.

The shortage of affordable housing is one of the social problems underlying the unrest in the Arab region. High youth unemployment rates have made it harder for young people to secure a house. Housing shortage causes stress for young people who have to spend most of their income on housing. It may also be a cause of marriage delay or even marital breakdown as housing is still linked to traditional family values in the Gulf region where the groom and his family are usually responsible for the expenses of marriage including housing.

The GCC housing crisis has been spurred by rapid population growth, the high cost of land and rising house prices, increasing urbanisation and lack of competition. Increased migration of population from rural to urban areas as well as an influx of foreign labour led to the expansion of large cities in the region causing a chronic shortage of housing and a huge increase in price. Available land is high in cost not only due to its scarcity but also because most landowners leave it unused letting its value increase.

In Bahrain, the housing crisis is acute mainly in Manama where demand is high. More than 55,000 Bahrainis are on the wait-list for low-cost housing. In Kuwait, the waiting time for a government housing grant is several years. Rising housing costs are an obstacle for middle and low-income Kuwaiti families to homeownership. In Qatar, the massive influx of foreign labour has led to high population growth and a heavy burden on the residential market. Housing problems have emerged in greater Doha region both for expatriates and nationals with limited income. In Oman, the demand for affordable housing continues to be high.

In Saudi Arabia the housing market, the largest in the GCC region, suffers from high land prices, high sale prices and a shortage of small houses. Estimates project that the country needs at least 15,000 housing units annually for residential property, but there is a serious mismatch between high prices of houses and lower salaries. Most Saudis live in rented accommodation and it is estimated that only 30 percent of Saudis own their houses. The cost of building a small house is around US$200,000, out of reach of many young Saudis. But as elsewhere, they prefer not to buy apartments for cultural reasons as well as lack of satisfaction in quality of building and high costs of maintenance and repairs.

In the UAE, both Abu Dhabi and Dubai experience a serious housing shortage for lower and middle-income nationals. As rents in Dubai are still considered to be lower than in Abu Dhabi, many residents who live in Dubai commute daily to work in Abu Dhabi. Emiratis applying for affordable housing in Abu Dhabi have to wait years and according to data published (April 2011) by the Abu Dhabi Chamber of Commerce and Industry there is a shortfall in supply of 40,000 residential units in Abu Dhabi.

The need for affordable housing

Rapid population growth and demographic changes are a major factor behind the increasing need for affordable housing in the GCC region. The total population of the GCC countries quintupled over the past 40 years, increasing from 7.8m in 1970 to 46.2m in 2011, and is projected to reach 65.6m by 2050. Saudi Arabia, which accounts for over 60 percent of the region's population, scored the highest rise in population - 28m in 2011, projected to reach 45m in the next 40 years.

The GCC region has become one the most urbanised areas in the world with over 75 percent of its population living in cities. During the past decades, GCC countries have experienced exceptional economic and social changes due to the oil boom and its subsequent flow of wealth, creating a fast-changing demography of population growth and large-scale urban development. It has also witnessed an increasing influx of rural and desert dwellers into urban areas as young people migrate to cities looking for jobs. Urban annual growth rates (2010-15) reached 3 percent in Qatar, 2.52 percent in the UAE, 2.42 percent in Kuwait, 2.38 percent in Saudi Arabia, 2.23 percent in Oman, and 2.21 percent in Bahrain. In 2011, 99 percent of the population in Qatar and 98 percent in Kuwait lived in urban areas. The lowest urban population was in Oman with 73 percent. It is projected that percentages will increase over the next 50 years.